In this exclusive two-part guelphspeaks series, learn the details of how the city manages its finances and has earned a “D” rating from the Canadian Taxpayers Federation. Of 20 major Ontario cities measured in the CTF study, Guelph ranked number 18.

This exclusive report examines the state of financial management of the City of Guelph. It includes examining the City of Guelph’s official financial statements for 2012 plus supporting documentation of the last four years in which spending exceeded budgets by $24,771,000.

All the data is extracted from the city’s official financial statements that are forwarded, as mandated, to the Ontario Ministry of Municipal Affairs.

There is argument about the interpretation of the official figures, but the real story lies in the bottom line: Why has the city overspent its budgets for the past four years?

It is ironic how Guelph taxpayer, Milton Burns, has been saying the same things after analyzing the city’s financial statements for several years. In a brief exchange with Coun. Leanne Piper in 2012, she disputed his figures on the cost of city employees. It became stunningly clear that she did not understand her own official city financial statements.

In this first part, details of how employee costs are manipulated to give the illusion of moderate compensation increases each year. The basis of the story comes from the city’s own financial statements as reported in a Q and A between the Fair Pensions for All organization’s Bill Tufts and its Guelph representative, Sue Ricketts.

Part One explains how civic employee compensation consumed 88 per cent of Guelph’s total tax revenue in 2012.

When the 2012 City of Guelph annual report was released recently, it revealed some startling increases in employee compensation. Let’s tune into the Q and A.

BILL: Sue what can you tell us about Guelph’s city finances particularly as they apply to staff compensation and pensions?

SUE: Citizens are concerned that civic employee pensions costs are exponentially growing across the province and especially here in Guelph. While salary growth is fairly moderate, the total compensation employees receive is soaring.

BILL: Looking at the finances in Guelph, what did you find?

SUE: Frankly in Guelph, employee compensation is out of control. Since 2008, the beginning of the “Great Recession”, earnings for taxpayers has stagnated with average wages in 2011 of $42,600. In the same four-year period, Guelph civic employees enjoyed total compensation increases of 31 per cent. In 2008, the city spent $124.8 million on compensation. Last year it spent $163.6 million.

BILL: Sue, how does that breakout per employee?

SUE: In 2012, the city had 1,441.76 full time employees (FTE). Remember there is a separation here describing staff compensation. There is the base salary component that the city uses in its reporting and the total compensation. The total compensation of each city employee is $113,394 per employee, including benefits and pension costs. Breaking it out, salaries consumed 77 per cent of total compensation, with the average city salary at $87,313.

BILL: How do these numbers relate to pension costs?

SUE: It is important taxpayers understand that the employee’s pension is calculated on 70 per cent of the final few years of salary. Based on the current Guelph figures, the average pension per employee is $48,619. If the employee chooses to retire before 65, the OMERS pension plan pays an average of $7.000 per year “bridge” money until the pensioner is eligible for Canada Pension Plan benefit and Old Age Security. It should be pointed out that the average age of retirement of Ontario public employees is 58 and police and fire employees is age 53. With those pension features, the average Guelph employee can retire with an annual pension of $62,199.

BILL: Sue, city management staff is earning more than $100,000 plus taxable benefits that is more than the average employee. What has happened with total management compensation costs?

SUE: Management salaries are disclosed in the provincial governments annual Sunshine list. In Guelph’s case there are 175 employees currently earning more than $100,000. Assuming they are eligible to retire after 35 years of service and they use the provision to buy back pensions. It is calculated that Guelph’s Chief Administration Officer who earns $199,860 a year, could receive an annual pension of $128,402. The city balks at revealing the estimates of management pensions, refusing to release its own numbers.

Also there are management employees who have been hired and are collecting pensions from previous jobs in the public service.

Part Two, Massaging the Numbers, of this important series will continue tomorrow.